Exercise-2 (Net cash provided/used by investing activities)
Posted in: Statement of cash flows (exercises)
Exercise-2(a):
The Big and Fast company provides the following information about its activities in the year 2016.
- Marketable securities purchased: $45,000
- Treasury stock purchased: $56,000
- Inventory purchased: $412,000
- Land sold: $95,000
- Machinery purchased: $278,000
- Common stock issued: $168,000
Required: Compute net cash provided/used by investing activities to be reported in the statement of cash flows of Big and Fast company.
Solution:

Note: The following activities have not been included in the above computation because these are not investing activities.
- Purchase of treasury stock – a financing activity.
- Purchase of inventory – an operating activity.
- Issuance of common stock – a financing activity.
Exercise-2(b):
The P&G company provides the following information for the year 2016:
- Old plant asset sold for $164,000 and the gain on such sale was of $5,000.
- Treasury stock purchased for $42,000.
- Investment purchased for $25,000.
- A new plant asset purchased for $115,000.
- Common stock issued for $375,000
Required: Calculate net cash provided/used by investing activites for P&G company using above information.
Solution:

Notes:
- The sale proceeds of old plant asset of $164,000 include gain of $5,000.
- Purchase of treasury stock and the issuance of common stock are not investing activities.
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That’s example of accounting exercise, I’m much appreciated. Thanks